Hey I found this interesting.... I thinking about a new car, one that gets a little better mileage than my current Ford. I've had Hondas in the past, always had good luck with them. For the record, my Ford has been just as reliable, but the Focus doesn't look good to me. So I thought I'd look at a Honda again. The two Toledo dealers don't have many on their lots, the Civic is popular. No problem. So on the way back from Detroit, I swung through the lot at Victory Honda. Got out of the car to look, and was set upon almost immediately by a sales person. As I looked at a model that I might like, I noticed that the dealer had added a sticker to the window. "Additional Market Adjustment - $2000". When I asked the sales person about it, he replied "supply and demand, the cars are hot". I replied, "not that hot", and got in my car to leave.
But I'm curious, where's the media? This isn't a new sports car, it's entry level basic transportation. If the media can make headlines out of a 25 cent bump in gas prices, why don't they talk about how the car dealer is gouging and sticking it to the little guy?
Don't get me wrong, I'm all for capitalism. But this dealer added more than 10% pure profit on top of the profit if they sold the car at sticker. When an oil company posts record profits, their profit margin is FAR LESS than this dealers profit margin.
Or is it because this dealer buys a lot of advertising? Hmmmmm.......
Simple supply side economics - the demand exceeds the supply.
I'm not saying I agree, but demand does drive the market. They'll sell it at whatever they can get away with.
Why would this be an issue for the media? Its one of the basic economic concepts - supply and demand.
A car (or any other consumer good, for that matter) is only "worth" what people are willing to pay for it. If people weren't willing to pay the markup price, the dealer would lower it in a hurry.
The same economic principles are being applied to SUVs, which are being reduced in price due to lower demand.
If you had a used Civic you were trying to sell on the private market right now, wouldn't you expect more for it than you might have expected for the same exact car a year or two ago?
.... or I didn't make it well. I agree with the supply and demand argument. The point is that when it's supply and demand for gasoline itself, it's news. The media uses terms like "gouging" to make news out of a rise in the price of gas. It also not like the price of gas has remained $2.50/gal, only to get to the pump and see an extra charge tacked on. You can be sure that Victory Honda is still paying Honda the same invoice price it was at the beginning of the model year. Honda doesn't say to their dealers "oh the car is hot, so we're tacking $2k onto the invoice price".
You still have the right to go to another Honda Dealer if you think you can beat that. If the dealer made whatever investment was necessary to have the cars available when everyone else is sold out, why not?
Nobody feels bad about the beating the dealers will take on the SUVs that aren't going anywhere. Back in the 70s people were fighting over VW Rabbits that were selling for $2500 over MSRP. In relative terms, that was much worse.